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Egypt’s benchmark stock index dropped the most in three weeks and Israeli shares retreated as tensions between the Middle Eastern states intensified after protesters attacked the Israeli embassy in Cairo.

Orascom Construction Industries (OCIC), Egypt’s biggest publicly traded builder, lost 1.6 percent. In Tel Aviv, Ampal-American Israel (AMPL) Corp., which has a stake in the company that supplies gas from Egypt to Israel, fell to the lowest level on record. The EGX 30 Index (EGX30) declined 1.1 percent, the most since Aug. 21, to 4,703.54 at 1:11 p.m. in Cairo. The TA-25 Index dropped 3.1 percent, the biggest intraday decline since Sept. 6. In the Persian Gulf, the Bloomberg GCC 200 Index (BGCC200) declined 0.2 percent.

“Spontaneous street violence over the weekend is a cause for concern and is undoubtedly weighing on the EGX,” said Julian Bruce, equity sales head at EFG-Hermes Holding SAE in Dubai. “Broader implications regarding future relations with Israel also have to be considered and in no way can that be construed positively.”

Saudi Arabia's ended nearly flat, with investors waiting for Monday's open on global bourses before committing more money to the local market following recent gains.

Zain Saudi rose for a second-day, up 0.8 percent, after Kingdom Holding said it would complete due diligence on its joint $950m bid to buy a quarter-stake in telecoms operator by the end of September. Kingdom gained 0.7 percent, also up for a second day.

The benchmark ended higher for a third session, up 0.04 percent to close at 6,141 points, trimming its 2011 losses to 7.2 percent.

Persian Gulf shares fell, sending Dubai’s index to the lowest level in almost a week, on concern Europe’s policy makers won’t be able to stop the region’s sovereign debt crisis from growing and after oil retreated.

Emaar Properties PJSC (EMAAR), developer of the world’s tallest tower, slipped as much as 0.7 percent. Dubai Financial Market PJSC, the only Gulf Arab stock market to sell stock to the public, fell the most in almost a week. The DFM General Index (DFMGI) lost 0.4 percent to 1,475.4, the lowest intraday level since Sept. 6, at 11:05 a.m. in Dubai. The Bloomberg GCC 200 Index (BGCC200) of the region’s stocks dropped less than 0.1 percent.

“Equities in the Middle East continue to track global markets and the current backdrop does not provide any buying conviction,” said Julian Bruce, equity sales head at EFG-Hermes Holding SAE in Dubai. “Gulf Cooperation Council markets are drifting lower due to an absence of domestic drivers.”

The United Arab Emirates' bank lending growth eased to a four-month low of 2.6 percent year-on-year at the end of July from 3.0 percent in the previous month, the Gulf country's central bank data showed on Sunday.

The debt of brokerage firms based in Dubai and Abu Dhabi Financial markets rose to about Dh1.5 billion by end of first half this year, according to the latest financial statements as reported in Arabic daily 'Al Bayan'.

About 35 companies were forced to shut down their activities, some partly, since 2009. This reflects the challenges faced by majority of such firms, it said and added that integration is the only solution for smaller firms.

Brokers said most banks reduced the size of the credit facilities granted to them or apologised for providing new facilities. They noted even banks are afraid of liquidity issues, suffered in the past, when it comes to offering services to customers. This is only adding to the miseries of brokerage firms, said some brokers.

Robust and timely support from the Gulf central banks have made the region's key financial institutions secure and safe powerhouses.

Their strength is in sharp contrast to the banks of the OECD, especially the European banks which are facing a calamitous future especially if the sovereign debt from Greece and other EU states blows up in their faces.

Investors take note, says Audi Capital: The low-key, under-rated regional financial institutions present an interesting alternative to the world's major financial institutions which are expected to go through more pain - and more layoffs - before they can put their house back in order.

The financial media in Gulf hydrocarbon producers is not good enough to assist investors and this has allied with lack of transparency and other factors to keep regional bourses inefficient, a financial analyst has said.

Ziad Dabbas, an investment and financial advisor at the government-controlled National Bank of Abu Dhabi, said stock markets in the six-nation Gulf Cooperation Council (GCC) are not classified as “efficient markets”.

He defined an “efficient market” as the market in which the flow of relevant information regarding investment options is easily accessed and reliable and where information is available to all participants at the same time.

Qatar National Bank Capital forecasts that Qatar’s nominal GDP per capita will rise to around $109,000 at purchasing power parity (PPP) by 2012 on the back of strong oil prices and increased output, according to QNB Capital’s upcoming "Qatar Economic Insight-September, 2011"reported.

Qatar became the richest country in the world in 2010 with the highest per capita income at $88,559 having overtaken Luxembourg,

Rising gas-related exports and high energy prices have been the main drivers of nominal GDP growth, according to the report.

The UAE will soon launch a landmark credit information company to provide information to banks on clients seeking loans as part of an ongoing government plan to bolster the financial sector and face fresh crises in the future.

The ministry of finance has completed the organizational structure of the company and provide Dh120 for its capital, which could be raised later to Dh200 million, said its undersecretary Yunus Khoury said.

“It will be a government establishment with a task to help banks in determining the credit status of clients…the company will have a paid up capital of Dh120 million and authorised capital of Dh200 million,” Khoury told 'Al Ittihad' daily.

The recently released Global Competitiveness Report 2011-2012 confirms continued success of at least some Gulf Cooperation Council (GCC) economies in sustaining progress of competitiveness of their global rankings. Qatar and Saudi Arabia made headway in the rankingsof their economies. Bahrain maintained its earlier ranking. However, the UAE, Oman and Kuwait saw their rankings plummet among the 142 economies ranked in the latest report.

The World Economic Forum (WEF) publishes the annual which ranks reviewed economies on the basis of their performance on the Global Competitiveness Index (GCI). In reality, GCI is noted for taking a comprehensive look into reviewed economies by relying on a set of variables.

More specifically, the index ranks economies on the basis of their achievement on three broad categories, namely basic requirements, efficiency enhancers and innovation and sophistication factors. In turn, the basic requirements category is subdivided into institutions, infrastructure, macroeconomic stability, health and primary education. Still, the efficiency enhancers category comprises higher education and training, goods and market efficiency, labour market efficiency, financial market sophistication, technological readiness and market size. Yet the innovation and sophistication factors category is made up of business sophistication and innovation.

With little vibrancy in the UAE's markets and trading levels depressed, efforts to revive the US economy and their effects on the price of oil are expected to be the driving force for local markets this week.

There was no post-Ramadan bounce in the UAE this year. The value of stocks traded on the Dubai Financial Market in the first week of business after Eid Al Fitr was less than one quarter of the value of trading during the same period last year, while the value of trading in Abu Dhabi was just 12.9 per cent of the value in the same period last year.

Other Gulf markets including Saudi Arabia and Qatar registered large increases in traded volume, even though stocks in those countries were battered by convulsions on world equity markets last month.

Saudi Arabian shares led by banks climbed for a second day, reversing earlier losses.

Al Rajhi Bank (RJHI), the kingdom’s largest publicly traded lender by market value, advanced the most in two weeks. National Industrialization Co. (NIC), the petrochemicals company known as Tasnee, and Yanbu National Petrochemicals Co. (YANSAB), gained more than 1 percent.

The Tadawul All Share Index (SASEIDX) strengthened 0.2 percent to 6,138.06, the highest level since Sept. 4, at the 3:30 p.m. close in Riyadh, extending its monthly gains to 2.7 percent. The 148-company gauge dropped as much as 1.2 percent at 11:55 a.m.

Bahrain can't hope to radically improve its economy, if the government remains hostile to the opposition and a majority of the population feels excluded from the political, social and economic progress of the country. In that sense, no amount of economic aid or Formula One events can gloss over the fundamental issues facing the country.

In many ways, Bahrain is the odd one out in the GCC bloc. The smallest state in the Gulf with the smallest economy and geographic area, Bahrain is also weak on natural resources, unlike its other fellow GCC members. Its Sunni rulers also find themselves in the minority and in the tough position of running a Shia-dominated population - other Gulf states don't have that acute problem.

And these issues appear to be undoing much of Bahrain's economic progress of the past few decades.